ULIP Insurance India-Pay less Charges Now

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ULIP Insurance India
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ULIP Insurance India-Pay less Charges Now
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ULIP Insurance India -Pay less Charges NowThere
is good and welcome news for investors willing to
invest in ULIP insurance policies. T he
Insurance Regulatory Development Authority
(IRDA) has put a cap on overall charges that
insurance companies can charge subscribers of
unit linked insurance policies (ULIPs).In the
recent years ULIPs or Unit Linked Insurance Plans
has been the thrust area for insurance companies
and contributes to a major part of life insurance
business in India. ULIP plans are a combination
of insurance and investments and easy to invest
compared to term insurance or other traditional
insurance policies. 
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There was always a conflict with regard to the
very high charges levied by insurance companies
(up to 60 in some cases) as compared to mutual
fund. ULIPs provide life cover and invest part
of the premium in stocks and bonds. In most
cases, the sum assured in the policy varies
according to the value of its underlying
assets.A right move by IRDA to cap the charges
for ULIP plans considering the consumers benefit
in mind. The changes will come into effect from
October 1, 2009. All existing products that do
not meet the requirements should be withdrawn or
modified by December 31, 2009 as stipulated by
IRDA. IRDA has mandated that the cap on
charges will be based on the difference between
gross and net yields of any product. 
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The net yield is the gross yield adjusted for all
charges. For insurance contracts which are of
tenor of less than or equal to 10 years duration,
the difference between the gross and net yields
shall not exceed 300 basis points, of which fund
management charges shall not exceed 150 basis
points. For other contracts (those whose
contract period is above 10 years) the difference
between gross and net yield shall not exceed 225
basis points, of which the fund management
charges shall not exceed 125 basis
points.Gross yield This is the yield
generated by the ULIP before all charges are
deducted. Net yield This is the yield generated
by the ULIP after all charges are deducted.
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Investments in ULIP or Unit Linked Insurance is a
long term planning and high initial charges can
delay the break even time for the investments .
Recently SEBI has scrapped the entry load on
mutual funds from 1 August and most of the Mutual
Fund Advisors were shifting to selling insurance
as the commissions were higher in insurance
selling, but this move was expected from IRDA
sooner or later. It is still not clear if the
mortality charges (Charges for Insurance Cover)
are part of the overall charges or they are
separate from the cap. Ideally the mortality
charges should not be part of the above charges
as they purely depend upon the age and health
condition of the consumer and the charges goes
higher along with age.
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Advantage to Consumers - 1. Investing in ULIPs
will become cheaper 2. Expected returns from
investments in ULIP will be higher due to less
initial and recurring expenses. 3. Advisors will
not push ULIP aggressively and mis-selling could
be brought down if not stopped. source
https//www.bajajallianz.com/Corp/ulip-plans/ulip.
jsp
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p.jsp
Thank You.!